By Martin Smaerup, Head of Sales, Pointspay
E-commerce sales continue to surge, with global online retail revenue projected to have reached $6.3 trillion in 2023 and grow to an estimated $8.1 trillion by the end of 2024. What's more, cross-border commerce is expected to grow by 108% between now and to 2028. Yet, the unfortunate truth for so many loyalty programs is that they are missing the opportunity to generate significant revenue from and engage members via e-commerce. In short, the relationship is faltering, but the good news is that it's a love story that can be rewritten.
Much of the problem comes down to the fact that consumer behavior has undergone a seismic shift in recent years. Modern shoppers seek convenience, efficiency and of course a good deal. Who could ignore the opportunity to spend less cash while also collecting points or miles? When they wish to purchase a pair of jeans or the latest iPhone, they navigate straight to a retailer, add the item to their basket, and swiftly proceed to the next thing. On the other hand, loyalty programs still rely on legacy technologies such as tracking, leading to a cumbersome and outdated user journey, necessitating multiple clicks and prompting them to consider loyalty points before the actual purchase.
“In today's fast-paced world, loyalty programs must be ever-present, offering a seamless and real-time experience.”
Due to this fractured user journey, only the most astute and dedicated loyalty program enthusiasts actively seek out extra points or miles. The pursuit of these rewards becomes a niche activity. The treasure hunters for miles are few and far between, and this failure to activate the remaining portion of the loyalty program's user base represents a missed opportunity of huge proportions.
Consumers today also demand immediate gratification. They have no patience for completing a transaction and then waiting weeks to receive their hard-earned points or miles. As a consumer myself, I can attest that I may not recall the transactions I made five weeks ago! In today's fast-paced world, loyalty programs must be ever-present, offering a seamless and real-time experience for consumers when they make online purchases.
Plus, many loyalty programs lean on outdated technology that is now reeling from the impact of the demise of tracking cookies. While some influencers claim to have found alternative solutions, they still rely on some form of transaction tracking, forcing customers to navigate through program websites.
So, what are loyalty programs missing out on? The answer of course includes revenue, but it extends much further. They are missing out on engagement opportunities, failing to activate their members in their day-to-day lives. These programs are not effectively integrating into their members' household budgets beyond travel-related expenditures. Loyalty currency must become an integral part of a member's life, fostering a continuous connection with the program.
The knock-on effect of this lack of engagement translates to a diminished focus on conquering the e-commerce market, as programs neglect the necessary marketing efforts.
The question remains: How much revenue are loyalty programs missing out on? The answer varies depending on consumer behavior and market dynamics. Over time, Pointspay aspires to capture a significant percentage of the total amount a member spends online. In Europe, this can amount to over €3,000 per member, while in the US this figure rises to $3,500 . And, let's not forget, frequent flyers are THE heavy shoppers, spending some five to seven times more on their credit cards than average consumers in their respective countries.
By ensuring that members earn miles or points on a significant proportion of their online spending, programs can multiply these benefits across their active member base. This discussion primarily focuses on active members, but there's significant untapped potential to activate those who engage with a program infrequently, perhaps only when booking their annual summer holiday. By encouraging them to integrate their household budget into everyday shopping throughout the year, programs can expand their pool of active members, unlocking substantial growth potential.
Building a loyal relationship
So, what can be done to optimize the situation? First and foremost, loyalty programs must position themselves where the consumers are—right at the retailer's doorstep. It has to be effortless and intuitive for consumers to capitalize on what could ultimately be a significant advantage offered by the program. Programs should align with users' natural behavior, motivating and rewarding them through real-time earning in their preferred currency or spending, creating a seamless, user-centric experience.
Real-time engagement is the linchpin. As previously mentioned, consumers will not tolerate delays. They conclude transactions swiftly and move on to the next. By seamlessly integrating real-time accruals with user-friendliness, programs can effectively engage and activate individuals in their everyday lives.
“Pointspay believes that a fully branded program is the way forward. Such branding is not only recognizable to program members but also intuitive for them to utilize.”
Are we at a juncture where a fundamental shift in mindset is required among program owners? Absolutely. The online realm demands a complete shift in perspective regarding what a solution should entail.
Pointspay believes that a fully-branded program is the way forward, providing programs with the opportunity to launch their own, instantly recognizable marketing and payment solution. Such a solution works, as program members understand the essence behind the brand. Of course, this brand needs to be effectively communicated to retailers to encourage the adoption of the payment solution it represents, providing multiple opportunities to engage with both active and dormant members. With a robust business case and a solid partnership in place, substantial revenues can be generated, even in the initial stages of implementing such a solution.
If we think specifically about airlines, this shift must coincide with an understanding of the changing behavior of frequent flyers post-pandemic. Virtual meetings and remote collaborations through platforms like Teams, Zoom, and Google Meet have reduced the need for physical meetings and, consequently, travel. As a result, airlines must explore alternative ways to sell miles or points.
Airlines possess a captivating product. Every trip, whether it's a dream vacation or a successful business excursion, leaves a lasting memory. After returning from a vacation, the next day often marks the beginning of planning the next adventure. Airlines can play a pivotal role in nurturing these dreams by contributing to them throughout the year, not just during specific trips. Real-time earning can make programs relevant every day, transforming them from sporadic engagements to daily experiences.
This shift represents the key to mending the fractured love story between loyalty programs and consumers, ultimately building a profound and enduring relationship.